How much equity is needed for a reverse mortgage?
Shawn M asked:
I am looking into getting a reverse mortgage for my father. He lives in the Miami, Florida area. About a 2 years ago he refied and I want to know whether or not he will be qualified because of the last of equity.
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I am looking into getting a reverse mortgage for my father. He lives in the Miami, Florida area. About a 2 years ago he refied and I want to know whether or not he will be qualified because of the last of equity.
February 25th, 2009 at 3:08 am
The maximum allowable for a reverse mortgage is soley dependent upon the borrower’s age. At age 62 the max DTI is 50% up to age 74 where the max DTI is at 70%.
A reverse mortgage is a very expensive, high risk loan to do. Depending upon where you are located the available DTI may be lower.
Before you make a decision like this speak to a trusted financial advisor, and whatever you do, use a bank. Not a broker who SPAMS on Yahoo Answers.
February 26th, 2009 at 8:19 pm
It is usually about 50%, but they also hold his others debts against him, which could lower his actually equity amount.
February 26th, 2009 at 10:17 pm
Please go to this web site (from Hud.gov). There is lots of information on there to be better informed.
The HECM FHA insured reverse mortgage can be used by senior homeowners age 62 and older to convert the equity in their home into monthly streams of income and/or a line of credit to be repaid when they no longer occupy the home. The loan, commonly known as HECM, is funded by a lending institution such as a mortgage lender, bank, credit union or savings and loan association. To assist the homeowner in making an informed decision of whether this program meets their needs, they are required to receive consumer education and counseling by a HUD-approved HECM counselor.
HECM counselors will discuss program eligibility requirements, financial implications and alternatives to obtaining a HECM and provisions for the mortgage becoming due and payable. Upon the completion of HECM counseling, the homeowner should be able to make an independent, informed decision of whether this product will meet their needs. You can also use this handy Reverse Mortgage Calculator to help you see if you qualify.
Homeowners who meet the eligibility criteria can complete a reverse mortgage application by contacting a FHA-approved lending institution such as a bank, mortgage company, or savings and loan association. If you need assistance locating a FHA-approved lender, you can request a listing of FHA-approved lenders from the HECM counselor or use HUD’s searchable listing.
Borrower Requirements:
Age 62 years of age or older
Own your property
Occupy your property as primary residence
Participation in a consumer information session given by an approved HECM counselor
Mortgage Amount Based On:
Age of the youngest borrower
Current interest rate
Lesser of appraised value or the FHA insurance limit
Financial Requirements:
No income or credit qualifications are required of the borrower
No repayment as long as the property is the primary residence
Closing costs may be financed in the mortgage
Property Requirements:
Single family home or 1-4 unit home with one unit occupied by the borrower
HUD-approved condominiums
Manufactured homes and leased land
Meet FHA property standards and flood requirements
How the Home Equity Conversion Mortgage Program Works:
Homeowners 62 and older who have paid off their mortgages or have only small mortgage balances remaining, and are currently living in the home are eligible to participate in HUD’s reverse mortgage program. The program allows homeowners to borrow against the equity in their homes. Homeowners can select from five payment plans:
Tenure – equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.
Term – equal monthly payments for a fixed period of months selected.
Line of Credit – unscheduled payments or in installments, at times and in amount of borrower’s choosing until the line of credit is exhausted.
Modified Tenure – combination of line of credit with monthly payments for as long as the borrower remains in the home.
Modified Term – combination of line of credit with monthly payments for a fixed period of months selected by the borrower.
Homeowners whose circumstances change can restructure their payment options for a nominal fee of $20.
Unlike ordinary home equity loans, a HUD reverse mortgage does not require repayment as long as the home is the borrower’s principal residence. Lenders recover their principal, plus interest, when the home is sold. The remaining value of the home goes to the homeowner or to his or her survivors. You can never owe more than your home’s value.
If the sales proceeds are insufficient to pay the amount owed, HUD will pay the lender the amount of the shortfall. HUD’s Federal Housing Administration (FHA) collects an insurance premium from all borrowers to provide this coverage.
The amount a homeowner can borrow depends on their age, the current interest rate, other loan fees and the appraised value of their home or FHA ‘s mortgage limits for their area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow.
For example, based on a loan with an interest rates of approximately 9 percent, and a home qualifying for $100,000, a 65-year-old could borrow up to 22 percent of the home’s value; a 75-year-old could borrow up to 41 percent of the home’s value; and, an 85-year-old could borrow up to 58 percent of the home’s value. The percentages do not include closing costs because these charges can vary.
There are no asset or income limitations on borrowers receiving HUD’s reverse mortgages.
There are also no limits on the value of homes qualifying for a HUD reverse mortgage. The value of the home wi
February 27th, 2009 at 1:00 am
The short answer: It’s best to talk to a reverse mortgage expert to determine whether your father qualifies.
Why? Because the amount you qualify for depends on a combination of things, including the equity you have in your home, your exact age, and your location. As a general statement, homeowners should have moderate to significant equity in their homes in order to eliminate their mortgage payment. I can say that Reverse Mortgages–particularly government-insured reverse mortgages commonly known as a home equity conversion mortgage (HECM) that are used as a financial tool designed to give homeowners over 62 access to their home’s equity– can be so helpful in today’s market.
Income and credit are not factors when you qualify; only your age, property and amount of equity determine how much cash you can get.
With any reverse mortgage, you will never make a mortgage payment as long as you live in your home.
The advantage of talking with a Reverse Mortgage Expert? The best ones willl walk you through your reverse mortgage options, requirements and help customize your loan for you.
Hope this helps! I’m including a couple links below that may help.
February 28th, 2009 at 11:51 am
There is no set amount of equity required. The total amount he’ll qualify for depends current equity, age, and FHA lending limits.
You can use this calculator to get a rough estimate of the amount he could qualify for: